Wednesday, April 15, 2009

Permission to Speak Frankly: How We Know More and Less From Breakfast Interviews With Marisa Lago

Last week Empire State Development Corporation CEO Marisa Lago was the interviewee in the “on the record” part of the "On/Off the Record" breakfast sponsored by City Hall News. A fraction more light can now be shed on that interview given Ms. Lago’s participation in another breakfast this week and her on-the-record, answers, previously unavailable to all the general public, to questions we asked about Atlantic Yards.

The subject of last week’s City Hall News breakfast interview was economic development in general. Atlantic Yards provided a large part of the morning’s fare, City Hall News interviewer Edward-Isaac Dovere conscientiously bringing it a number of times amongst a short list of the most important big projects for which the state, through Ms. Lago and ESDC, is responsible. All of those big projects may be considered troubled as we will touch upon here.

Atlantic Yards Report has already covered the key revelation (of the “obvious”) of last week’s breakfast interview: Atlantic Yards is going to take far longer than previously averred by the state in court proceedings and far longer than the public was told or has otherwise been officially acknowledged. Based on what Ms. Lago said, Atlantic Yards isn’t going to take 10 years as previously planned: It is going to take “decades” (See: Thursday, April 09, 2009, ESDC CEO Lago admits the obvious: Atlantic Yards would take “decades”.)

You should definitely read Norman Oder’s Atlantic Yards Report piece on the morning interview especially for how it parses out the inconsistency of Ms. Lago’s “revelation” with prior information ESDC supplied to the public. That information was also used to create the misleading court record based upon which ESDC litigated. Other things occurred during the morning that we think supply insight into the public agency’s economic development process. We would like to let you know about these this as best we can. We say “as best we can” because we are hampered in telling you what you certainly ought to know by the peculiar format of the breakfast interview: Only some of the morning’s event, the interview by Mr. Dovere and Ms. Lago’s response were on the record. Unfortunately, what impedes us is that the publicly attended question and answer session that followed the interview was “off the record.”

We are going to respect the breakfast’s “off the record” rules, but we don’t agree that they are a good thing. In fact, we think they are representative of something exceedingly bad for society, the idea, that there can be concentric circles of access to public officials, and that depending upon how far “in” you are, what club you can be a member of, you will get to know a respectively greater portion of the “truth” that our public officials know and can relate when they speak with greater candor.

Have you ever suspected that within the most inner circles our public officials and those close to them speak absolutely frankly about Atlantic Yards, including acknowledging that it is a "wired deal" being done, not because it benefits the public but because the political fix is in, that it is a burlesque of counterfeit process structured to give Mr. Bruce Ratner a special deal based on relationships and political contributions? Do you wonder whether the multi-decade time line for Atlantic Yards referred to as previously “obvious” by Norman Oder has long been a subject of frank discussion in inner circles long before it was officially disclosed by Ms. Lago? Is that why the official documents signed by public agencies long ago actually accommodate this multi-decade developer monopoly? Don’t bother to wonder.

By that same token, there were perhaps 50 people at the City Hall news breakfast, including bank tellers and officers at the TD Bank (317 Madison Avenue, corner of Madison and 42nd Street) which played host to the event. Those individuals will know a lot more about what Ms. Lago said when speaking (somewhat) more frankly about development of our city than those of you who were not present. You will know less because we are going to respect the rules and not report anything that was “off the record” that morning.

We will, however, tell you more of what you should know that was actually on the record. We also figured out how to inform you about at least some of what you ought to know that was off the record: We are putting on the record our Noticing New York Atlantic Yards question that we orally put to Ms. Lago the morning of the breakfast and later resubmitted to the ESDC press office in writing for the on the record response she has now supplied.

How Many Decades of Blight is ESDC Assisting Atlantic Yards Developer Forest City to Create?

First, let us return to the subject already covered by Atlantic Yards Report. How long has Ms. Lago admitted that Atlantic yards will take? How many “DECADES” will it be?

Norman Oder’s strictly construed analysis is that Ms. Lagos’s admission that it will be “decades” (plural) means that Atlantic yards will take at least 20 years. We think however that the fair import of Ms Lago’s remarks is that Atlantic Yards is likely to take the better part of three or four decades, or perhaps even longer. It is especially troubling to us that for what is likely to be the better part of a half century, ESDC will be giving an extended development monopoly over more than 30 acres to BYOB (“Bring Your Own Blight”) developer/subsidy collector Forest City Ratner.

Ms. Lago when describing how long Atlantic Yards would take said it was “similar” in “scale” to “Roosevelt Island, a project that has grown over decades, 42nd Street, a project that has grown over the past 25 years.” (Emphasis supplied.) More specifically, Roosevelt Island got underway at the beginning of the ‘70s and the UDC lease that initiated things was signed in 1969. The project is not yet finished so it is already at least a four decade project. Times Square, as noted, has taken at least 25 years. (BTW: The fact that eminent domain is still being used for Times Square redevelopment at this late date to favor certain developer’s acquisitions raises troubling policy questions.)

Here is what Ms. Lago said at last week’s breakfast:

Mr. Dovere: Let’s finish, in terms of talking about projects, with talking about everybody’s favorite, the Atlantic Yards which doesn’t seem to be one that generates a lot of answers all the time.

Ms Lago: Obviously, challenging project again. Projects conceived in a different time and in a different economy - But, a few things: One, the focus now is very much on moving forward with the Nets stadium and with the housing that is on that first block, the first phase of the project. Attenuated time lines, I think, are a reality for private sector and for public sector projects. There is nothing wrong with that. We look at the history of the transformational projects that have occurred in the city. Earlier I was discussing with some of the folks here, Roosevelt Island, a project that has grown over decades, 42nd Street, a project that has grown over the past 25 years and the scale of the scale of the Atlantic Yards is similar in that it is remaking, it is reknitting a portion of the city. So, as I said, focus on what can get done now in the current climate, what is financable now. And also recognizing that it is a project that is scheduled to grow out over multi-years, decades, not over months.

What Is the Proper Way for the State to Foster Economic Development? A “New Realism!”

In predicting a multi-decade time frame for Atlantic Yards Ms. Lago may have been incorporating some of her thinking, expressed just moments before, about the development of Moynihan Station. She said there was a “new realism of saying that plans that had been conceived in frothier times when there was an expectation that millions of square feet of new office towers could crop up, were unlikely to occur.”

The other thing we noted when she was talking about this “new realism” is that Ms. Lago seems to be adopting our Noticing New York thinking about how Moynihan Station should be developed. We think that the government should do what it does best, infrastructure, and that the Bloomberg administration has wasted its years in office on this project by virtue of being distracted by an unnecessary effort to create “public/private partnerships” which in the end surrenders too much control and responsibility to developers. Ms. Lago therefore sounded rather like us when she said (emphasis supplied):

And so it is a back to the basics and a focus on ongoing discussions with Port, ESDC, the city, the various parties in interest, about focusing on the transportation facets. We know that Senator Schumer has been very helpful in advocating for a focus on stimulus funding. That’s the type of project that is going to take years, will provide jobs along the way and doesn’t in any way foreclose, I think quite the opposite, sets the stage for private sector development down the road. It won’t happen in the first phase, but by having an enhanced transportation infrastructure it will be the catalyst for rebirth of the far west side.

That seems to comport with what we have been saying. Here is part of a longer analysis of the problem previously provided by Noticing New York (and, yes, we believe our longer analysis is worth referring to):

. . . . If you are not building a new train station but negotiating to buy and redesign a whole neighborhood with the goal of putting private developer profit in your pocket, you are talking a whole different time frame and the lead winds up being taken by entities whose eye is on a different ball. Developers were focusing on building towers where Madison Square Garden is and enacting laws to transfer development rights to adjacent properties they owned or were trying to buy.

The fact of the matter is, development has a way of happening on it own as Seth Pinsky, President of the New York City Economic Development Corporation, recently admitted at another City Hall News "On/Off the Record" breakfast session. (See: Thursday, April 09, 2009, NYC EDC head on recent past: "We’ve been much more the 'Real Estate Development Corporation'".) Mr. Pinsky’s admission: “What occurred to me was that, really, for much of the last several years, even though we call ourselves the Economic Development Corporation . . . the economy has been growing on its own without much need for the city’s interference.” We might add to “without much need for the city’s interference” the following which naturally goes along: Without any need for special multi-billion subsidy deals for specially handpicked developer friends of the mayor and other politicians.

If the city does development the right way and invests in infrastructure such as transit (Moynihan Station included), it can expect development, as Ms. Lago was admitting, to follow. To paraphrase urban planner Alex Garvin, `development-oriented transit’ is preferable to that which the Bloomberg administration is doing too much of: `transit-oriented development’ (e.g. Atlantic Yards). For instance, city investment to put light rail, bike lanes and trees along 21st Street in Astoria as Mr. Garvin recommends (going west to the East River to create a new “public realm”) would, Mr. Garvin predicts, create tremendous amounts of new housing and the community would NOT be opposed to the investment. (See: Tuesday, July 22, 2008, At MCNY panel, defending dissent and promoting the better way to develop (not like Atlantic Yards).) Garvin’s “back to basics” prescription in this regard is “spend more money on the public realm.” (See: Monday, November 03, 2008, Overdevelopment, zoning, and the public realm (and AY).)

(Here, for reference, is the extended version of Ms. Lago’s statements at the breakfast:

Moynihan Station, as I am sure you know, the Governor, this past summer before I joined, was looking to the Port Authority to take this forward. I think, again that was part of the new realism of saying that plans that had been conceived in frothier times when there was an expectation that millions of square feet of new office towers could crop up, were unlikely to occur. Why? Because the market is telling us that there isn’t the demand, there isn’t the private sector financing. And so it is a back to the basics and a focus on ongoing discussions with Port, ESDC, the city, the various parties in interest, about focusing on the transportation facets. We know that Senator Schumer has been very helpful in advocating for a focus on stimulus funding. That’s the type of project that is going to take years, will provide jobs along the way and doesn’t in any way foreclose, I think quite the opposite, sets the stage for private sector development down the road. It won’t happen in the first phase, but by having an enhanced transportation infrastructure it will be the catalyst for rebirth of the far west side.)

Struggling to Get a Few Questions and Answers about Atlantic Yards on the Record

As noted, the Q&A session was “off the record” but since we think it is important for the public to know what was said about Atlantic Yards, here is our solution for partially informing you. We can tell you on the record what our question to Ms. Lago was. Also, because we conferred with City Council candidate Josh Skaller, we can tell you for the record the question he asked Ms. Lago about Atlantic Yards. While we can’t tell you what Ms. Lago’s answers were at the breakfast and we don’t even think we can tell you whether our questions were, in fact answered, Noticing New York submitted these questions to Ms. Lago for on the record responses which we got. Originally, ESDC was not willing to answer Mr. Skaller’s question if it was submitted through us, but when we said that we would adopt it for submission as a second question of our own we were able to get an answer. Mr. Skaller is also obtaining an answer to his question directly.

Noticing New York’s Question to Ms. Lago About Atlantic Yards

We asked Ms. Lago the following.

We have seen with the Wall Street crisis that the lack of transparency and proper valuation has led to “toxic assets” being held by a swath of financial institutions across the economy. Doing finance, I think you are in a culturally linked area. When I was doing the kind of work that you are doing I used to think that if you couldn’t find a worthwhile project it was time to stop providing subsidies and maybe take away an agency’s programs and powers. In that vein how do you justify a developer-driven, -initiated and -designed project like Atlantic Yards, where ESDC has admitted that it never weighed the public benefit as opposed to the private benefit that was designed into that project by the developer. I think that is contrary to what you said you were calling for in the Empire Zone program where you said that you were analyzing actual benefit.

That was the question we asked orally. In our written follow-up we were able elucidate our reference to Ms. Lago’s earlier remarks at the breakfast about the Empire Zone program (emphasis supplied):

Regarding my question, Ms. Lago will remember that, when speaking of the Empire Zone program, she talked about the importance of evaluating what is funded in the program for delivery of actual benefit, saying that ESDC currently has in the program some businesses that don’t even return a dollar’s worth of benefit for each tax dollar of tax break which is given to them. She explained that this had come about when the program morphed over the years and its focus was lost so that accountable measures of benefit were also lost. She said that was not a sustainable approach and that reform of the program was to include evaluating firms for removal from the program.

(We take it that our readers will perceive by analogy that public agencies really and truly do drift off course for political or other reasons so that they wind up being involved in delivering projects with little or no benefit or project which are actually deleterious to the public good like Atlantic Yards.)

We have received Ms. Lago’s written response to our question from ESDC. Here it is:

Although AY is a developer initiated project - we have carefully reviewed the expected impact of the project and the expected benefits to be generated from the project - in terms of jobs, fiscal benefits, the production of affordable housing and the removal of blight. We think this is a good deal for the City and State - especially now.

We don’t think we are allowed to tell you whether this response is as satisfactory as the answer we either did, or did not, receive at the breakfast, or whether it was the same or even similar. Only the 50 members of the public who were at the breakfast will have the privilege of evaluating that. We will point out however that we disagree with the on the record assessment that the project is, or ever was, “a good deal for the City and State.” That is partly because we don’t think the project delivers any real benefit and it is also because we have years of experience as a public official negotiating public benefit. As a negotiator experienced in this field we think that it is impossible for ESDC to say that it is a “good deal” given that ESDC has admitted in court that it never weighed the public benefit as opposed to the private benefit that was designed into that project by the developer even though the project was developer driven, initiated and designed. (See: Thursday, March 5, 2009, Missing a Leg To Stand On: ESDC Didn’t Consider Developer Profit, the Main Thing Atlantic Yards is About.)

(Here for consideration and comparison, here is Ms. Lago speaking more frankly at the breakfast about the Empire Zone Program, another ESDC program for which she is responsible, that sometimes fails to create value:

ML: A second is the Empire Zone program. This is program which has been much maligned for years, and we were fortunate in this legislative session to put in place a couple of very significant reforms to the program. One is a requirement that new businesses entering the program produce $20 dollars of benefit. And what is benefit? It’s the wages that are paid and it’s the capital investment that businesses make for every dollar of tax credit. And in a particularly deft move, a wise move, there is a recognition that manufacturing jobs are key jobs for the state and so for manufacturing firms the ratio for benefit to the state was10 to 1. Now the program sunsets in a year and that, I think, poses an opportunity, a challenge and an opportunity, which is working with the business community to design a program, the economic development strategy of a program, that will replace the Empire Zone program.

Asked to explain the arcane program and the hoped for effect Ms. Lago continued.

ML: The Empire Zone program started out in the ‘80s as an attempt to put together a very rich package of tax benefits for a small handful of extremely economically depressed communities throughout the state. So the notion that the state would have a tool to attract jobs to those areas that were the most intractable. It has ballooned over the years. There are now 85 zones. There are 9000 companies in these zones and as the program morphed over the years the focus on the most economically distressed areas was lost and the measure, the accountability of what was the state getting in return was also lost. We currently have in the program some businesses that don’t even return a dollar’s worth of benefit for each tax dollar of tax break which is given to them. That is just not a sustainable approach. And that was one of the reforms, that those firms will be evaluated for removal from the program. Now, currently, the Empire Zone program costs over $500 million a year. It’s a half a billion program. It has become quite untargeted: 85 zones, 9000 firms. I think it’s incumbent on us to step back and say if we are to design a successful program what are the strategic industries that we want to focus on and also get back to the roots of particular areas- what are the economically distressed areas that we want to target. We know that it’s a useful attraction tool for companies that are thinking of coming to the state, or unfortunately, when a company is thinking of relocating out of state. But it does need to be more far more focused, I think we can employ the $500 million more effectively.)

The Question From City Council Candidate Josh Skaller “Adopted”by Noticing New York As Its Own

Candidate Josh Skaller’s question was:

Given delays in construction and the difficulty they are going to have actually to bring the Atlantic Yards project about and given the amount of money being spent on Atlantic Yards, couldn’t that money be better spent on other smaller projects, such a smaller local jobs? Especially given the need for direct job stimulation in New York?

Ms. Lago’s on the record response to this question is:

We expect that the AY project will generate a substantial number of construction jobs - commencing in 2010 - as well as permanent jobs once the arena and project get built out.

The response while vague actually provides some real news: The project won’t commence until 2010. Notwithstanding the ever-receding commencement dates that have been officially offered heretofore, that’s a later date than anyone has previously talked about.

Some Other Questions We have For Ms. Lago

As can be noted from Ms. Lago’s on the record response to our question, “the expected benefits to be generated from the project” include “the removal of blight.” Based on a chat we had with Ms. Lago after the breakfast’s Q&A concluded we also asked ESDC press office for more information as to Ms. Lago's impression, based on her personal experience, that there is blight in the neighborhood around Atlantic Yards. In answer to this, we have so far been informed that Ms. Lago likes to bicycle in Brooklyn. This limited answer does not fully cover what Ms. Lago told us about how she formed her personal experience-based impression that there is blight in the neighborhood. We want to know when her personal impressions were formed and we are waiting for more information about this. Also, what particular areas were involved in contributing to Ms. Lagos’ personal impression?

Another Week, Another Breakfast With Ms Lago

This week, as noted, there was another breakfast where Ms. Lago discussed development and Atlantic Yards. The breakfast featured the heads of the State and City development agencies, Ms. Lago and Robert Leiber, respectively.

Has ESDC known all along that Atlantic Yards was going to take decades (as we suspect), longer than they were previously telling the public and longer than they were telling the courts in the litigation? If what Mr. Schuerman said on the Brian Lehrer show was true, then Ms. Lago was at this week’s breakfast transmuting her earlier “revelation” of a longer Atlantic Yards time table into something that, in fact, has been known for some time whether or not the public and courts were fairly put on notice: Speaking about Atlantic Yards and some other big projects “They were supposed to take lots of time to build and we still have plenty of years to go.”

Here is the whole of what Mr. Schuerman said on Brian Lehrer (at 7:55), saying that the two economic development heads were:

“basically assuring the New York Building Congress, a construction industry group here in New York City, that all these projects you hear that are on the rocks, Atlantic Yards, West Side Railyards, Willets Point: They’re not dead yet, in fact, they’re far from dead. They were supposed to take lots of time to build and we still have plenty of years to go. And stimulus funding did come up in regards to one maybe dead or maybe not dead project, Moynihan Station, on Manhattan’s West Side. Senator Schumer a while ago said that Amtrak should give $100 million that it has through the stimulus package - and give it to Moynihan Station. And the one bit of news, there wasn’t much this morning, but the one bit of news was Marisa Lago the head of the Empire State Development Corporation, saying that it was unclear whether any part of that project was shovel ready and would actually qualify for stimulus funding.

Mr. Schuerman’s short written account of the breakfast with its provocative headline “Projects Whose Names None Dare Speak” focused more dramatically on the tap dancing the public officials did to avoid mentioning the city’s big projects which are “the public private partnerships”and their big delays, particularly Moynihan Station. Mr. Schuerman wrote:

New York Times reporter Charles Bagli, one of the moderators, got impatient at one point, telling panelists, “I was struck by the fact that so many of the projects–the public private partnerships that dominated the headlines, that dominated the public approval process–were not mentioned or were barely mentioned this morning.”

* * * *

Marisa Lago, of Empire State Development, said Atlantic Yards was “clearly a challenging project in this environment.” [Sound like a scripted repeat of the earlier breakfast?] She said her agency was focusing on meeting a December 31st deadline to qualify for tax-exempt bonds. [Humm: What about that 2010 start mentioned above?]

On Hudson Yards, Robert Lieber deputy mayor for economic development, said it would be “decades before that is completely built out.” [If that sounds like a scripted repeat of the earlier breakfast, someone else was handed the script!]

Bagli, the reporter, brought up another hibernating project: Moynihan Station–which was first conceived in the early 1990s as a renovation of the Farley Post Office on Eighth Avenue, exploded in scope, and has since returned to smaller, but indeterminate, shape. (Bagli called it the project that “none dare call its name.” . . . .)

Lago, the state economic development chief, threw cold water on Senator Schumer’s idea to convince Amtrak to devote $100 million of its stimulus funding to the station, saying officials had not figured out what part of Moynihan could qualify as “shovel ready.”

There you have it: More than 15 years, and three-and-a-half environmental reviews later, Moynihan Station still isn’t shovel ready.

Speculation about Inspector Generals Investigating Projects Like Atlantic Yards If They Get Stimulus Money

Does is seem as if all this dancing around, failure and lack of frankness on the part of public officials doesn’t stand up to scrutiny? There may be more scrutiny coming. Among other things, the same Brian Lehrer program (with a different moderator standing in for Lehrer) concluded (at 16:25) with an interesting prediction of investigative journalism headlines in this area (if there are still newspapers around 18 to 24 months from now.):

Moderator: This calls into question, Rick Newman, the issue that I put off earlier which is transparency, which obviously has a lot of people concerned, where is this money going, how is it being spent, who’s accountable? What are you seeing now, on a national level to make sure that this process does unfold in a fair and equitable way?

Rick Newman: We’ve seen very little oversight so far because there’s just not enough information yet. But here is a prediction: In a year or eighteen months, I think, (if there are any newspapers left) we’re going to see some very interesting investigative headlines about portions of stimulus money being used for illicit purposes and for pet projects at the state and local level. And here’s why: I think that in Washington there is a great deal of oversight. You know, it’s practically a cottage industry; you’ve got the Government Accounting Office, you’ve got all these subcommittees in Congress, inspector generals in every department of the federal government - - Not so much at the state and local level where oversight tends to be more lax and, you know this is kind of a feeding frenzy - - And I think the Obama administration knows that. And I think they are trying to find the right balance between flushing money into the system which is one way, one of several ways, to help get the economy started and getting it out throughout the country, which you have to do, and getting it out quickly. And I think they are kind of making a deal with the devil by accepting what is some inevitable waste, fraud and abuse. So by the time we start to hear about this in eighteen months or two years, if we are lucky the economy will be back on its feet, and Obama is probably gambling that he will be able to say, “Hey look, we kick-started, we jump-started the economy, we will look into this, prosecute it if necessary but things are going good.” We’ll see what happens. It’s going to be interesting because if that time line plays out that will be right around the time of the 2010 elections.

Mr. Newman’s prediction reminds us of what we wrote about how multiple inspector generals might be actively investigating Atlantic Yards if stimulus money is ever used for it:

It is interesting when just one office like a State inspector General’s Office has jurisdiction to look into improprieties. They may ignore them or choose to be lethargically inactive. What may raise interest sufficient to get an investigation rolling under one state administration may differ from another administration, and vice versa. We have noticed, however, that the dynamic often changes significantly when at least two such offices share jurisdiction over a matter: Casual disregard of a matter’s significance recedes as an option and competition can take hold. We certainly don’t ever want to see Atlantic Yards put on a list of projects to potentially receive federal stimulus money. But if that were ever to happen, a shift in the dynamic of who wants to investigate what and when and with how much vigor could cause things to become very interesting.

Earlier on we spoke of our disquiet with the idea of surrounding our public officials with concentric circles of access, with those being closer in having access to greater candor about what is going on with the development process in this city. We find objectionable the idea that as you go further and further into these circles, more “truth” is available and that it’s not until you have accessed the innermost concentric ring that real truth is available. Unfortunately, the reason we think that there is no candor is because the truth would be so objectionable to the public if revealed. That makes the prospect that the truth might come out through a future inspector general’s investigation exceedingly interesting.

About Me

NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com